If Royal Bank of Scotland owner NatWest moves head office to London, should we care?

Over years and decades, you become used to some beating about the bush by corporate leaders when asked about matters relating to their company which might draw them into the political sphere. Sometimes, company bosses decline to comment. They might even do so on the basis that what they are being asked about will depend on what happens.

The NatWest chief’s response featured none of these things. And the forthright nature of it ensured that it drew major political reaction, and remained in the headlines for days, ahead of the Scottish Parliament election tomorrow.

Ms Rose, who worked for NatWest when it was acquired by Royal Bank of Scotland back in 2000 after a hostile takeover battle (having joined the English bank as a graduate trainee in 1992), said last Thursday: “We have been very clear, and it is recognised by senior nationalists, that in the event that there was independence in Scotland, our balance sheet would be too big for an independent Scottish economy, and we would move our registered headquarters… to London.”

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She added: “It is really just the size of the balance sheet at that point, which we have been very clear in public about and with senior nationalists.”

Ms Rose declared the bank was “neutral” on the issue of Scottish independence. “It is something for the Scottish people to decide,” she said.

Of course, this is not the first time the institution now headed by Ms Rose has been frank about what it would do in the event of Scottish independence, at a time of elevated political tensions.

However, the timing of last week’s comments was interesting. The Scottish Parliament election has not even taken place yet. And, even if the SNP wins a majority, the UK Government has stated its opposition to allowing a second independence referendum so the situation on this front remains to be seen.

Ms Rose could perhaps have said it was not a question for now, or that it would depend. But she did not.

That said, the institution she now leads, still branded Royal Bank of Scotland for its operations north of the Border, did state the same plan regarding the head office in the days leading up to the 2014 Scottish independence referendum.

The bank said then: “In response to press speculation in relation to re-domicile, The Royal Bank of Scotland Group plc confirms that…there are a number of material uncertainties arising from the Scottish referendum vote which could have a bearing on the Bank’s credit ratings, and the fiscal, monetary, legal and regulatory landscape to which it is subject. For this reason, RBS has undertaken contingency planning for the possible business implications of a ‘Yes’ vote. RBS believes that this is the responsible and prudent thing to do and something that its customers, staff and shareholders would expect it to do.

“As part of such contingency planning, RBS believes that it would be necessary to re-domicile the Bank’s holding company and its primary rated operating entity (The Royal Bank of Scotland plc) to England.”

It was noted in this Called to Account column at the time of this September 2014 intervention that Royal Bank of Scotland might just have taken a big potential problem off the hands of then First Minister Alex Salmond and any future independent Scottish government.

The column observed the bank’s plan to move its head office nameplate from Edinburgh to London in the event of a Yes vote should ensure in such a scenario that the Bank of England would remain its lender of last resort, and that a Westminster government would have to stump up the capital if another financial crisis ever prompted a need for a new bail-out.

These remain important points.

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Just to reiterate, the bank’s 2014 comments were made only days ahead of an independence referendum. Ms Rose’s remarks come at a time when the independence debate is raging but also at a juncture where it is far from clear what will happen in terms of whether or not there will be another referendum. So, while the chief executive was reiterating the bank’s previously stated position, it is noteworthy she chose to address the question head on and give such a full response, with the Scottish Parliament election looming.

Amid all the clamour whipped up by Ms Rose’s comments, it is important to hold on to a few key points of reality.

The first is that the institution headed by Ms Rose is not really in a practical sense run from Scotland any more, in that the chief executive’s contract states that she is based in London.

Yes, the nameplate and registered office remain in Scotland, and it might be tempting to get wrapped up in symbolism.

However, by the time of the 2014 referendum, of course, what was then still Royal Bank of Scotland at holding company level had already been majority-owned by the UK taxpayer for years. The UK Government has obviously had a huge say as a result of its majority stake since the global financial crisis, so even by 2014 the bank was not the autonomous Scottish-based institution it was before it required a bail-out to the tune of tens of billions of pounds in the depths of a global financial crisis which began in earnest in autumn 2008.

That said, it did from an external perspective seem even by 2014 to be run far more from Scotland than it is now.

What people should now bear in mind in the context of Ms Rose’s comments, whatever their views on independence, is that NatWest is not really a Scottish-based bank any more, other than in a technical sense.

The renaming decision would seem to underline this point.

That is not to say that the bank is not very important from the perspective of the Scottish economy, in terms of the employment it provides. Its lending decisions will also play a very significant part in determining the Scottish economy’s path both amid and in the wake of the coronavirus crisis. Hopefully, these decisions will be supportive of hard-pressed businesses and consumers, for the greater economic good.

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Who knows what will happen on the Scottish constitutional front.

However, seeing as Ms Rose has gone into detail and her comments have been pored over and dissected, it is worth mulling what the bank likely would and would not do in the event of independence.

The registered office would move – that much seems pretty clear.

However, what is far more important for the Scottish economy than a brass plaque, whatever the constitutional situation, is the employment provided by the bank and the institution’s interactions with business and personal customers.

Presumably, what is now NatWest Group would not be rushing to scale back its presence in a lucrative market because of constitutional change, if it were to occur. And surely Scotland is relatively cost-effective when it comes to the bank’s employment of thousands of people in highly skilled roles north of the Border, something which should provide comfort regardless of what does or does not happen on the independence front.

It is interesting that former chief executive Ross McEwan, just ahead of the 2014 referendum, emphasised that any registered office decision in the event of a Yes vote should not affect jobs.

Mr McEwan said then of the bank’s contingency plans in a memo to staff: “This is a technical procedure regarding the location of our registered head office. It is not an intention to move operations or jobs. Our current business in Scotland, including the personal and business bank, IT and operations, human resources and many other functions, are here because of the skills and knowledge of our people, and the sound business environment.

“So far, I see no reason why this would change should we implement our contingency plans.”

Ms Rose seemed to make a similar point last week but in much broader terms. For all her forthrightness on the registered office moving to England in the event of independence, she insisted such a shift would not affect the bank’s commitment to Scotland.

This point got rather lost amid the noise, which is a pity.

No doubt, in the political sphere, much would be made of a head office move to England, as has been the case with the mere mention of it. Putting politics to one side and taking a step back from the febrile independence debate, we should recognise, given that where the bank is run from has already shifted, it would not be that big a deal at all.